Naked Put

DEFINITION of 'Naked Put'

A put option whose writer does not have a short position in the stock on which he or she has written the put. Sometimes referred to as an "uncovered put."

BREAKING DOWN 'Naked Put'

Naked puts are very risky since the writer can lose big if the underlying asset moves opposite to the desired direction. But, profits are huge if the underlying asset moves in the right direction.

RELATED TERMS
  1. Naked Writer

    An options seller who does not own the underlying security for ...
  2. Writer

    The seller of an option who collects the premium payment from ...
  3. Uncovered Option

    A type of options contract that is not backed by an offsetting ...
  4. Put To Seller

    The exercise of a put option. Put to seller would usually occur ...
  5. Grantor

    1. A seller of either call or put options who profits from the ...
  6. Covered Writer

    An options seller who owns the underlying security represented ...
Related Articles
  1. Options & Futures

    Prices Plunging? Buy A Put!

    You can make money on a falling stock. Find out how going long on a put can lead to profits.
  2. Options & Futures

    Introduction To Put Writing

    Learn about a strategy that may be appropriate if you have a positive outlook on a stock.
  3. Options & Futures

    Naked Call Writing: A Risky Options Strategy

    Learn about this aggressive trading strategy to generate income as part of a diversified portfolio.
  4. Professionals

    Becoming A Financial Writer

    Instead of working on Wall Street, write about it.
  5. Options & Futures

    Options Hazards That Can Bruise Your Portfolio

    Learn the top three risks and how they can affect you on either side of an options trade.
  6. Options & Futures

    Prices Plunging? Buy A Put!

    Investors can make money on a falling stock by going long on a put.
  7. Options & Futures

    Bear Put Spreads: A Roaring Alternative To Short Selling

    This strategy allows you to stop chasing losses when you're feeling bearish.
  8. Options & Futures

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  9. Options & Futures

    The Basics of Options Profitability

    The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want it to do it profitably.
  10. Options & Futures

    What Is A Bull Put Spread?

    Investopedia explains: A bull put spread is a variation of the popular put writing strategy, in which an options investor writes a put on a stock to collect premium income and perhaps buy the ...
RELATED FAQS
  1. My brokerage firm won't allow naked option positions. What does this mean?

    A naked position refers to a situation in which a trader sells an option contract without holding a position in the underlying ... Read Answer >>
  2. Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... Read Answer >>
  3. Are put options more difficult to trade than call options?

    Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets ... Read Answer >>
  4. How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option ... Read Answer >>
  5. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  6. How do traders combine a short put with other positions to hedge?

    Learn how sold puts can be utilized in different types of hedging strategies, and understand some of the more common option ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center